Using Cost Pass-Through to Calibrate Demand
We demonstrate that cost pass-through can be used to inform demand calibration, potentially eliminating the need for data on margins, diversion, or both. We derive the relationship between cost pass-through and consumer demand using a general oligopoly model of Nash-Bertrand competition and develop specic results for four demand systems: linear demand, logit demand, the Almost Ideal Demand System (AIDS), and log-linear demand. The methods we propose may be useful to researchers and antitrust authorities when reliable measures of margins or diversion are unavailable.
Year of publication: |
2012-10
|
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Authors: | Miller, Nathan H. ; Remer, Marc ; Sheu, Gloria |
Institutions: | Antitrust Division, Department of Justice |
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